There’s been plenty of uncertainty, concerns, and what have you, but forget all that for a moment. If you were shipping out to sea, you’d be hard-pressed to find a sounder vessel than the U.S.S. Economy.
There is evidence aplenty that the U.S. economy is solidly heading into 2025. Federal Reserve Chair Jerome Powell said it was performing “substantially better than our global peer group.”
“The economy is strong overall and has made significant progress toward our goals over the past two years,” Powell said after the Federal Open Market Committee meeting last week. “The labor market has cooled from its formerly overheated state and remains solid. Inflation has moved much closer to our two percent longer-run goal. Recent indicators suggest that economic activity has continued to expand at a solid pace. GDP rose at an annual rate of 2.8 percent in the third quarter, about the same pace as the second quarter.”
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The jobs market has been gaining an average 173,000 jobs monthly over the last three months. At 4.2%, unemployment is historically low. Nominal wage growth has eased. The jobs-to-workers gap has narrowed. Powell said labor market conditions are less tight than in 2019, meaning employment is “not a source of significant inflationary pressures.”
“Retail sales increased a better-than-expected 0.7%, up from an upwardly revised 0.5% gain in October,” wrote BMO Chief U.S. Economist Scott Anderson in an emailed report last week. “It was the best monthly performance for retail sales since September. The consensus had been looking for a 0.6% increase.” There were strong sales in motor vehicles and parts, non-store retailers, sporting goods, building materials, furniture, and electronics. Retail sales were also up 3.8% year over year last month, and consumer spending is about 69% of GDP.
As the New York Times noted, Biden administration policies gave companies incentives to increase their investment in manufacturing and chip production. Much of this came in the Inflation Reduction Act of 2022 and the payoff from the legislation is expected to continue for some years.
There’s evidence that CRE activity is picking up. Bank CRE loan originations are on the rise. In the third quarter, origination volume was $4.4 billion, up from $3.9 billion in Q2 and $3.5 billion in Q1. Originations “rebounded” in 2024. Multifamily Q3 originations were up 76% year over year. Some of the factors pushing the increase were declining financing costs and pent-up demand from postponed 2023 transactions.
And then there are the Fed’s indications that it will slow interest rate cuts in 2025. That may seem on the surface like bad news, but it’s the opposite. The central bank sees a strong economy that doesn’t need an immediate additional boost to keep going.
So, put off the doubts for the moment and enjoy some good news.
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